PRODUCTIVITY GROWTH AND WORKER REALLOCATION

Rasmus Lentz and Dale Mortensen

International Economic Review, 2005, vol. 46, issue 3, 731-749

Abstract: Productivity dispersion across firms is large and persistent, and worker reallocation among firms is an important source of productivity growth. An equilibrium model of growth and firm evolution designed to clarify the role of worker reallocation in the growth process is studied. We show that it explains the correlations between size measures and labor productivity found in Danish firm data. Conditions under which the reallocation of workers from less to more productive firms contributes to aggregate productivity growth in the economy modeled are derived. Finally, a proof of existence of an equilibrium solution to the model is also provided. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Date: 2005
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